On Wednesday Roger Boyes, the Diplomatic Editor of the London Times, wrote an op-ed piece critical of the West’s approach to the Iranian nuclear situation. You can read the full article here. In summary his view is that during the current negotiations Iranian President Rouhani may be making all the right noises about the lack of intent to build a nuclear bomb, but because he is a transient figure on the Iranian political scene, Boyes suggests that unless there is an agreement to international monitoring of the Revolutionary Guard, which is the stronger and more permanent force in Iranian politics and which controls the Iranian nuclear programme, then promises made so far will be worthless. As a result Iran will achieve a nuclear bomb and the world will be powerless to do anything about it in retrospect.
On Wednesday it was reported that Martin Lidegaard, Danish Foreign Minister, had urged the Syrian government to expedite the handover of chemical weapons promised as part of the negotiated agreement made by Syria last year to remove all chemical weapons on a defined timetable. You can read a Reuters report here. Syria has already missed several interim deadlines for relinquishing their stockpile, and although 92% of their chemical weapons have now been accounted for there are worrying discrepancies in their inventory. The deal requires the process to be completed by June 30th, but the general view is that this deadline will also be missed. The Danes are involved because one of their ships is due to take delivery of the chemicals, but the Syrians have prevaricated in handing them over and the ship is now stuck in the Eastern Mediterranean waiting for its cargo.
On Wednesday, during Prime Minister’s Questions in Parliament in London, there was much angry argument about the value of assurances made the previous day by Ian Read, CEO of the pharmaceutical giant Pfizer, that if their negotiations to take over Astra Zeneca are successful there was no plan to lose jobs and R&D in the UK. Pfizer have a poor track record in this regard; in addition when Kraft Foods were negotiating to acquire Cadbury in 2010 assurances were made to the UK Government during the negotiations that a Cadbury factory near Bristol would be protected, but within a week of the acquisition being completed Kraft announced that the factory would close, with the loss of 400 jobs.
What is the value of a promise or an assurance in a commercial negotiation? Of course there are differences in different cultures; if a supplier in Germany promises to deliver by a certain date then that is treated as a firm commitment, and only a catastrophe will stop it from happening. In some Southern European countries a promise is more like an aspiration – there is hope and enthusiasm, but a lower expectation on either side that it will actually happen.
The simple expedient to ensure that a promise will be kept is to put a price on the breach, normally a sanction or a price penalty. But in a commercial relationship (as well as in the political relationships in the examples given above) implementing the sanction can be suicidal.
I once agreed a rebate scheme with a client based on the client’s assurances of volumes given at the beginning of the contract. When the promised volumes were not achieved we refused to pay the rebate; the client went bonkers and threatened to terminate the relationship. We were legally and morally in the right, but in a practical sense in deep trouble. We eventually cut a deal whereby we paid the rebate but the scheme for the following year had to make up the shortfall before we started counting.
I have to go now – I promised my wife I will fix a dripping tap in the bathroom. It has been dripping for many years; and I have made many promises... but we are still married.
Stephen White